Question 1

Which of the following statements is false?

Accepted Answer

A)  Not all individuals in both countries are made better off as a result of international trade. 
B)  Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. 
C)  Although some individuals may not be made better off as a result of international trade, both countries may be made better off overall. 
D)  Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off. 
A)  Not all individuals in both countries are made better off as a result of international trade. 
B)  Within each country, some individuals are made better off as a result of international trade, but one of the countries will be worse off overall. 
C)  Although some individuals may not be made better off as a result of international trade, both countries may be made better off overall. 
D)  Each country as a whole is made better off as a result of international trade, but individuals within each country may be made worse off.

Question 2

Figure 9-2   Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff.
-Refer to Figure 9-2. The tariff causes domestic consumption of rice

Accepted Answer

A)  to fall by 27 million pounds. 
B)  to fall by 11 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 16 million pounds. 
A)  to fall by 27 million pounds. 
B)  to fall by 11 million pounds. 
C)  to rise by 6 million pounds. 
D)  to rise by 16 million pounds.

Question 3

Table 9-12
Production and
Consumption Production
Without Trade With Trade
   Estonia and Morocco can produce both swords and belts. Table 9-12 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-12. Prior to trade, what was the opportunity cost to produce 1 sword in Estonia?

Accepted Answer

A)  1/2 of a belt 
B)  4/5 of a belt 
C)  1.25 belts 
D)  2 belts 
A)  1/2 of a belt 
B)  4/5 of a belt 
C)  1.25 belts 
D)  2 belts

Question 4

Automobiles and many other products are differentiated. As a result

Accepted Answer

A)  different countries may each have a comparative advantage in producing different types of automobiles. 
B)  consumers of automobiles have difficulty deciding what type of imported automobile to buy. 
C)  the quality of imported automobiles is less than it could be. 
D)  we see countries specializing completely in the production of automobiles. 
A)  different countries may each have a comparative advantage in producing different types of automobiles. 
B)  consumers of automobiles have difficulty deciding what type of imported automobile to buy. 
C)  the quality of imported automobiles is less than it could be. 
D)  we see countries specializing completely in the production of automobiles.

Question 5

International trade

Accepted Answer

A)  harms consumers but helps exporting firms. 
B)  helps consumers but harms exporting firms and their workers. 
C)  helps consumers but hurts firms that are less efficient than their foreign competitors. 
D)  helps consumers and firms that compete with their foreign competitors. 
A)  harms consumers but helps exporting firms. 
B)  helps consumers but harms exporting firms and their workers. 
C)  helps consumers but hurts firms that are less efficient than their foreign competitors. 
D)  helps consumers and firms that compete with their foreign competitors.

Question 6

Table 9-4
   Rob Crusoe and Bill Friday spent their week-long vacation on a desert island where they had to find and make their own food. Rob and Bill spent one day each fishing and picking berries. The table lists the pounds of output Rob and Bill produced.
-Refer to Table 9-4. Use the table above to select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Bill has a comparative advantage in catching fish. 
B)  Rob has a comparative advantage in picking berries. 
C)  Rob has a comparative advantage in catching fish and picking berries. 
D)  Bill has a comparative advantage in picking berries. 
A)  Bill has a comparative advantage in catching fish. 
B)  Rob has a comparative advantage in picking berries. 
C)  Rob has a comparative advantage in catching fish and picking berries. 
D)  Bill has a comparative advantage in picking berries.

Question 7

In the United States during the Great Depression, tariffs were ________ than they were following World War II, and ________ than they are today.

Accepted Answer

A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower 
A)  higher; higher 
B)  higher; lower 
C)  lower; higher 
D)  lower; lower

Question 8

Prior to the 1998 World Cup, France banned the use of all soccer balls made by child workers. Several economists criticized the ban. Which of the following is an argument these economists used to justify the use of child labor in some countries?

Accepted Answer

A)  Soccer balls are easy to carry and workers were given soccer balls to play with. 
B)  Child workers were allowed to attend school during the periods they worked. 
C)  Child workers were given gloves to protect their hands while they stitched soccer balls. 
D)  Some of the alternatives to stitching soccer balls include begging and prostitution. 
A)  Soccer balls are easy to carry and workers were given soccer balls to play with. 
B)  Child workers were allowed to attend school during the periods they worked. 
C)  Child workers were given gloves to protect their hands while they stitched soccer balls. 
D)  Some of the alternatives to stitching soccer balls include begging and prostitution.

Question 9

In the 1930s, the United States charged an average tariff rate ________. Today, the rate is ________.

Accepted Answer

A)  of 100 percent; 20 percent 
B)  above 50 percent; less than 1.5 percent 
C)  of less than 10 percent; over 40 percent 
D)  of 17 percent; 33 percent 
A)  of 100 percent; 20 percent 
B)  above 50 percent; less than 1.5 percent 
C)  of less than 10 percent; over 40 percent 
D)  of 17 percent; 33 percent

Question 10

The "Buy American" provision in the 2009 stimulus package required that stimulus money be spent only on U.S.-made goods, effectively acting as a quota of zero imports when stimulus money was being spent. For the U.S. steel industry, a "Buy American" provision would create gains for all of the following except

Accepted Answer

A)  U.S. steel companies. 
B)  U.S. taxpayers. 
C)  U.S. steel workers. 
D)  All of the above would gain from the provision. 
A)  U.S. steel companies. 
B)  U.S. taxpayers. 
C)  U.S. steel workers. 
D)  All of the above would gain from the provision.

Question 11

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as

Accepted Answer

A)  the Pacific Trade Association. 
B)  Trade Without Borders. 
C)  NAFTA. 
D)  the Western Trade Union. 
A)  the Pacific Trade Association. 
B)  Trade Without Borders. 
C)  NAFTA. 
D)  the Western Trade Union.

Question 12

Suppose in Finland a worker can produce either 32 cell phones or 4 kayaks while in Canada a worker can produce either 40 cell phones or 10 kayaks.
a. Which country has an absolute advantage in cell phone production? In kayak production?
b. What is the opportunity cost of 1 cell phone in Finland? In Canada?
c. What is the opportunity cost of 1 kayak in Finland? In Canada?
d. Which country has a comparative advantage in cell phone production? In kayak production?
e. Suppose each country has 1,000 workers. Currently, each country devotes 40 percent of its labor force to cell phone production and 60 percent to kayak production. What is the output of cell phones and kayaks for each country and what is the total output of cell phones and kayaks between the two countries?
f. Suppose each country specializes in the production of the good in which it has a comparative advantage. What is the total output of cell phones and kayaks in the two countries?
g. Provide a numerical example to show how Finland and Canada can both gain from trade. Assume that the terms of trade are established at 6 cell phones for 1 kayak.

Accepted Answer

a. Canada has an absolute advantage in t

Question 13

Table 9-1
   Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week.
-Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

Accepted Answer

A)  Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B)  Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C)  Sandy has an absolute advantage in dog bathing and dog grooming. 
D)  Linda has an absolute advantage in dog bathing and dog grooming. 
A)  Linda has an absolute advantage in dog bathing and Sandy has an absolute advantage in dog grooming. 
B)  Sandy has an absolute advantage in dog bathing and Linda has an absolute advantage in dog grooming. 
C)  Sandy has an absolute advantage in dog bathing and dog grooming. 
D)  Linda has an absolute advantage in dog bathing and dog grooming.

Question 14

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

Accepted Answer

A)  comparative advantage works better in theory than in practice. 
B)  some countries have more resources than other countries. 
C)  tastes for many traded goods are similar in many countries because of globalization. 
D)  production of most goods involves increasing opportunity costs. 
A)  comparative advantage works better in theory than in practice. 
B)  some countries have more resources than other countries. 
C)  tastes for many traded goods are similar in many countries because of globalization. 
D)  production of most goods involves increasing opportunity costs.

Question 15

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Accepted Answer

A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient 
A)  higher; less efficient 
B)  higher; more efficient 
C)  lower; less efficient 
D)  lower; more efficient

Question 16

Figure 9-5   Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff.
-Refer to Figure 9-5. The tariff revenue collected by the government equals

Accepted Answer

A)  $10 million. 
B)  $15 million. 
C)  $19.875 million. 
D)  $35 million. 
A)  $10 million. 
B)  $15 million. 
C)  $19.875 million. 
D)  $35 million.

Question 17

Which of the following statements is false?

Accepted Answer

A)  Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs. 
B)  Each year the United States exports about 50 percent of its wheat crop and 20 percent of its corn crop. 
C)  Most of the leading exporting countries are large, high-income countries. 
D)  Not all sectors of the U.S. economy are affected equally by international trade. 
A)  Exports benefit trading countries because exports create jobs. Imports do not benefit trading countries because they result in a loss of jobs. 
B)  Each year the United States exports about 50 percent of its wheat crop and 20 percent of its corn crop. 
C)  Most of the leading exporting countries are large, high-income countries. 
D)  Not all sectors of the U.S. economy are affected equally by international trade.

Question 18

a. Define the term "globalization."
b. Describe the benefits of globalization.
c. Who is likely to oppose globalization and why?

Accepted Answer

a. Globalization refers to the process o

Question 19

The Smoot-Hawley Tariff

Accepted Answer

A)  lowered U.S. tariffs by 50 percent following World War II. 
B)  was passed by the U.S. Congress following the Civil War as a means of increasing government revenue. 
C)  was passed by the U.S. Congress upon a recommendation made by the General Agreement on Tariffs and Trade (GATT) in 1948. 
D)  raised average tariff rates by over 50 percent in the United States in 1930. 
A)  lowered U.S. tariffs by 50 percent following World War II. 
B)  was passed by the U.S. Congress following the Civil War as a means of increasing government revenue. 
C)  was passed by the U.S. Congress upon a recommendation made by the General Agreement on Tariffs and Trade (GATT) in 1948. 
D)  raised average tariff rates by over 50 percent in the United States in 1930.

Question 20

Table 9-11
Production and
Consumption Production
Without Trade With Trade
   Denmark and Belize can produce both clocks and hats. Table 9-11 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 9-11. Prior to trade, what was the opportunity cost to produce 1 hat in Denmark?

Accepted Answer

A)  1/6 of a clock 
B)  2/3 of a clock 
C)  1.5 clocks 
D)  6 clocks 
A)  1/6 of a clock 
B)  2/3 of a clock 
C)  1.5 clocks 
D)  6 clocks

Exam 9: Comparative Advantage and the Gains From International Trade

Which of the following statements is false?

Figure 9-2 Suppose the U.S. government imposes a $0.40 per pound tariff on rice imports. Figure 9-2 shows the impact of this tariff. -Refer to Figure 9-2. The tariff causes domestic consumption of rice

Automobiles and many other products are differentiated. As a result

International trade

In the United States during the Great Depression, tariffs were ________ than they were following World War II, and ________ than they are today.

Prior to the 1998 World Cup, France banned the use of all soccer balls made by child workers. Several economists criticized the ban. Which of the following is an argument these economists used to justify the use of child labor in some countries?

In the 1930s, the United States charged an average tariff rate ________. Today, the rate is ________.

The 1994 agreement that eliminated most tariffs among the United States, Canada, and Mexico is known as

Table 9-1 Linda and Sandy own The Preppy Puppy, a dog grooming business. Table 9-1 lists the number of dogs Linda and Sandy can each bathe and groom in one week. -Refer to Table 9-1. Select the statement that accurately interprets the data in the table.

In the real world we don't observe countries completely specializing in the production of goods for which they have a comparative advantage. One reasons for this is

Once a country has lost its comparative advantage in producing a good, its income will be ________ and its economy will be ________ if it switches from producing the good to importing it.

Figure 9-5 Suppose the U.S. government imposes a $0.75 per pound tariff on coffee imports. Figure 9-5 shows the impact of this tariff. -Refer to Figure 9-5. The tariff revenue collected by the government equals

Which of the following statements is false?

a. Define the term "globalization." b. Describe the benefits of globalization. c. Who is likely to oppose globalization and why?

The Smoot-Hawley Tariff

Economics: Foundations and Models

Trade-Offs, Comparative Advantage, and the Market System

Where Prices Come From: the Interaction of Demand and Supply

Economic Efficiency, Government Price Setting, and Taxes

Externalities, Environmental Policy, and Public Goods

Elasticity: the Responsiveness of Demand and Supply

The Economics of Health Care

Firms, the Stock Market, and Corporate Governance

Consumer Choice and Behavioral Economics

Technology, Production, and Costs

Firms in Perfectly Competitive Markets

Monopolistic Competition: the Competitive Model in a More Realistic Setting

Oligopoly: Firms in Less Competitive Markets

Monopoly and Antitrust Policy

Pricing Strategy

The Markets for Labor and Other Factors of Production

Public Choice, Taxes, and the Distribution of Income

GDP: Measuring Total Production and Income

Unemployment and Inflation

Economic Growth, the Financial System, and Business Cycles

Long-Run Economic Growth: Sources and Policies

Aggregate Expenditure and Output in the Short Run

Aggregate Demand and Aggregate Supply Analysis

Money, Banks, and the Federal Reserve System

Monetary Policy

Fiscal Policy

Inflation, Unemployment, and Federal Reserve Policy

Macroeconomics in an Open Economy

The International Financial System

Filters

In the United States during the Great Depression, tariffs were than they were following World War II, and than they are today.

In the 1930s, the United States charged an average tariff rate . Today, the rate is .

Once a country has lost its comparative advantage in producing a good, its income will be and its economy will be if it switches from producing the good to importing it.